The Northern Virginia Daily's Political Depot

A service for our readers outside the Northern Shenandoah Valley... a sampling of The Daily's political coverage, plus unofficial, 'reporter's notebook' stuff. And occasional dry humor...

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Location: Strasburg, Virginia

Friday, March 10, 2006

House bill would bring taxes overhaul; B1

By Garren Shipley and William Flook
(Daily Staff Writers)

RICHMOND — Virginia legislators have signed off on a major overhaul of state and local telecommunication taxes that, for some, might mean a lower bill.

For others, it’s a definite tax hike.

House Bill 568, patroned by Del. Samuel A. Nixon, R-Richmond, repeals virtually all state and local taxes on all telephone, cable television and other telecom services and replaces them with a flat 5 percent levy.

Taxes would be paid to the state, which would then distribute the money to local governments based on the rates they had in effect as of Jan. 1.

But the bill also extends the new 5 percent tax to two areas that up until now had been tax free — satellite radio and satellite television.

That tends to level the playing field for cable providers, said David Ferguson, vice president of customer service for Shentel. Shentel provides telephone, cable and Internet service for a number of homes from Strasburg to Harrisonburg.

“That’s absolutely one of the benefits,” he said. But it could also be a boon to consumers, who have been paying cable franchise fees and E-911 fees that vary wildly from place to place.

If approved by Gov. Timothy M. Kaine, the change would make it easier for Shentel to collect and remit the various fees, Ferguson said. Everyone wins, he said, as long as the state doesn’t shortchange local governments.

“The trick is going to be keeping municipalities whole,” he said.

Jeff LeHew, president of Via Satellite Inc., a major provider of satellite television in the region, is not a fan of the new tax, which he expects will reflect in his customers’ monthly bills.

But he’s also concerned about the tax being applied across the board to satellite television’s constant rival: cable.

“As long as every pay-TV service is paying the same amount of money with the increase, then I’m not as unhappy about it,” LeHew said. “But I still don’t like to see our customers have to pay more.”

Kaine is reviewing the bill and hasn’t said whether he will sign it, according to spokesman Kevin Hall.

The bill completely reworks how cities, counties and towns deal with communications taxes.

In Shenandoah County, for example, telephone customers pay a bevy of state and local fees, including state and local fees for 911 services, utility taxes along with state and local sales taxes.

Cellular phones incur sales taxes, a separate 911 fee, as well as state and local levies. Cable television incurs utility taxes and franchise fees, among others.

Now, all phones will be charged a 75-cent 911 fee each month. It was $2.05 in Shenandoah County, according to Shentel’s Ferguson.

Utility tax money isn’t chump change, either. Shenandoah County takes in more than $1 million per year in utility taxes, according to Deborah Reedy, the county’s chief deputy treasurer.

Collecting the funds will be much simpler if the bill becomes law, she added.

But the measure wasn’t popular with the Northern Shenandoah Valley’s legislative delegation. In fact, the only member who didn’t vote against the measure was state Sen. H. Russell Potts Jr., R-Winchester, who abstained.

The reasoning is simple, according to Del. Clay Athey, R-Front Royal — for a number of rural customers, the bill represents a tax hike.

“It taxes cell phone use and it taxes satellite use … for the first time,” Athey said.

In his district, residents in Middletown and Front Royal have been paying taxes on cable for some time. But a large number have small satellite dishes, and this would be the first time taxes are levied on those bills.

“I felt like it was actually a net loss for us,” Athey said. Still, the bill is not without merit.

“I understand the principle behind it. [But] from my standpoint, I’m not sure we should be taxing any [communications services].”